Menu

Your Easy Bridging Loans UK Guide

Over the last few years, the bridging loans UK industry has grown hugely in popularity as growing numbers look to secure flexible and quick funding.

Most of these applicants are looking to secure a property purchase but it’s important to appreciate that bridging finance is really a short-term loan product that will plug any financial gap.

Essentially, most people know of bridging loans as a way to buy a new property while the anticipated sale of their current home goes through which will then release the funds to repay the bridging loan.

However, bridging loans UK are also a useful funding option for those who are looking for quick finance such as investors wanting to buy a property at auction.

Others may be looking to refurbish or renovate a property quickly before then selling it on at a profit.

As mentioned, a bridging loan should only be seen as a short-term funding option and most products will have a loan term ranging from one month to 24 months.

Most lenders will offer 12 months on average, with the administration fees and interest charges usually being ‘rolled-up’ and settled when the loan falls due.

Find the best bridging loan

The interest rates between lenders will vary and their administration fees will also be subject to variations, so it’s always worthwhile shopping around to find the best bridging loan for meeting your needs.

Also, unlike a traditional mortgage, the interest on a bridging loan will be charged on a monthly basis with the full amount being paid at the end of the term and there’s no need for monthly instalments.

It needs to be appreciated that the only fee that needs paying is for the valuation report, but otherwise, there are no upfront costs that a borrower will be expected to pay.

The other attraction for a bridging loan is down to how much you can borrow.

Since the amount will be restricted to the type and value of security property being used by the applicant, you can borrow from several thousands of pounds to several millions of pounds.

That’s a very attractive incentive for many businesses who may, for example, be wanting to plug a cashflow problem or to invest in the refurbishment of their premises.

But it’s not just businesses who are accessing this type of finance, there’s also a growing trend from others who are, for example, looking to pay a large tax bill that falls due or who may simply want to take up an investment opportunity.

Sourcing a bridging loan

When it comes to sourcing a bridging loan, not only are there growing numbers of lenders entering the market but they also have a very quick decision-making process, unlike high street lenders who can take weeks or even months coming to a decision.

With bridging finance, you can have a decision in principle within a day or two, with a formal offer being made within one or two weeks. This means that the completion of the process, which will include the creation of the legal paperwork and an independent valuation of the security property, will take between two and four weeks.

Another appealing aspect of bridging finance is if the applicant has credit issues, for example, a poor credit rating.

For many lenders, the finance is determined by the security that’s in the property and the exit route being offered.

This means that the borrower knows when they will have the money to repay the bridging loan, this is known as a ‘closed’ loan, and these tend to attract the lower rates of interest.

Alternatively, those borrowers who do not know when they are able to repay their bridging finance will have what is known as an ‘open’ loan and these tend to cost more.

So, we’ve mentioned in this quick guide that bridging loans have a faster application process, an applicant can borrow fairly large amounts depending on the security property and the borrowing itself is on a flexible basis.

Short-term nature of bridging finance

It also needs to be appreciated that because of the flexibility and short-term nature of bridging finance, the interest rates tend to be higher than from high street lenders.

Also, the loan will have an administration charge and this can be relatively high depending on the amount being borrowed.

The borrower also needs to appreciate that the bridging finance is being secured against their property and they need to think carefully before going down this route to borrow money.

If you would like more help and information about bridging loans UK, then it’s time to speak with the experts at The Bridge Crowd.